Developers Settle Suit by Ex-Owners / Housing was built on mall site

Todd Henneman, Chronicle Staff Writer

Published 4:00 am, Tuesday, September 22, 1998

1998-09-22 04:00:00 PDT PENINSULA -- A Palo Alto couple will receive $4.5 million in a settlement with a development company that bought the failing Old Mill shopping center in Mountain View and replaced it with housing.

Plymouth Mountain View, Inc. has agreed to the settlement with John and Patricia Reilly, former part-owners of the mall and owners of the Old Mill restaurant Fargos.

The Reillys filed a lawsuit in January 1994 arguing that Plymouth Mountain View had restructured financing for The Crossings residential development, built on the Old Mill site, and excluded them from profits that they deserved.

"All along, the developers had been telling them that they were going to get nothing," said Mark Strombotne, a San Jose attorney representing the Reillys. "The only reason it was going to be that way was because they (the developers) had restructured the whole thing to other entities."

Plymouth Mountain View bought the 16-acre Old Mill center in 1990 after the Reillys and their business partners had defaulted on their loan and faced foreclosure.

"Once you have a complex relationship with complex agreements, there's bound to be disagreements," said attorney George Fisher, who represents The Crossings and Plymouth Mountain View. "Now they've all been resolved."

Fisher declined to comment on details of the agreement, but Strombotne said the Reillys have received $1 million and will receive the balance early next year.

The Old Mill opened in 1976 near San Antonio Road and Central Expressway with boutiques and a multiscreen theater complex that attracted shoppers and moviegoers from throughout the Peninsula. But the mall lacked anchor stores such as Macy's, and only three tenants remained in the 162,000-square-foot mall by 1990. Plymouth Mountain View bought the property in 1990 to build The Crossings, a development of single- family houses and townhouses.

In the sales agreement, the Reillys limited their share of profits in exchange for priority in the distribution of profits and $8,000 a month until the project's completion, Strombotne said.

The monthly payment stopped in February 1992 after the recession hit. Dependent on the payments, the Reillys were forced to sell their Sharon Heights home in Menlo Park.

Developer Douglas Haynie, a principal of Plymouth, and other investors formed New Mill Mountain View Limited Partners in 1993. Restructuring the finances, shrinking the size of the project and transferring part of the property to another company in which Haynie also was involved had excluded the Reillys from future profits, Strombotne said.